Reserve-Bank.com - Banking Forum

[sapphirecapital]

June 24, 2008
Lawyers in Hong Kong have been told to step up the checks they make on potential clients amid growing concern over the twin threats of money laundering and terrorist financing.

Under a series of measures announced by the Law Society of Hong Kong, from July 1 lawyers will have to carry out strict due dilligence" checks on all clients before taking their business.

If they do not, they could break the law and/or be in contravention of Hong Kong's obligations under international agreements.

The move reinforces existing obligations to report dodgy dealings under Hong Kong's anti-drug and organized crime laws which have been in place since the 1990s but, according to law enforcement sources, have not been enthusiastically embraced by all.

It also comes just days after a meeting in London of the world's money laundering and terrorist financing watchdog the Financial Action Task Force discussed a report into how Hong Kong tackles the problem.

Sources with knowledge of the FATF's report into Hong Kong say it pointed out some deficiencies in both the number of suspicious transaction reports being made here and the willingness of some professions to make them.

The Hong Kong report has not yet been made public and, it is understood, will not be until further discussions have taken place and it has been ratified by the Asian arm of the FATF, the Asia- Pacific Group on Money Laundering.

The law in Hong Kong has been clear for many years that anyone who does not report a suspicious transaction commits an offense, a law enforcement source said.

Guidelines for lawyers, accountants and financial services firms on this have been there for a long time they just haven't taken them seriously enough.

While some have done their best, there hasn't been a great deal of enthusiasm right across the board to do so.

In 2003, Hong Kong's already strict reporting guidelines under laws introduced in the 1990s were buttressed by guidelines from the FATF which extended suspicious reporting responsibilities to cover lawyers, accountants and real estate agents.

The United Nations Office on Drugs and Crime estimates criminal syndicates and terrorist organizations wash between US$500 billion (HK$3.9 trillion) and US$1 trillion of illicit funds through the global financial system each year. Under the new measures clients will need to provide information on the purposes and sources of funding, beneficial ownership of companies as well as identification when they hire a lawyer.

The amount of information required will depend on the nature and complexity of the transactions and lawyers will be given a one year adjustment period.